- Gold futures recently hit an all-time historic high at almost €1,700 an ounce
- Silver and gold futures have outperformed all other major commodities this year
- Silver is up almost 37% year-to-date
- Gold is up 29% year-to-date
There are many ways to invest in these precious metals but what are the most affordable ways to buy gold and silver?
Physical Bullion Trusts
Bullion trusts offer a convenient and very cost-efficient way to buy physical gold and silver. The trust holds and stores the bullion and offers shares for purchase via the stock market.
The Sprott physical bullion trusts, based on Canada, offer several options for gold and silver, listed below, with their ticker symbols:
- Sprott Physical Gold Trust (PHYS)
- Sprott Physical Silver Trust (PSLV)
- Sprott Physical Gold and Silver Trust (CEF)
The Sprott trusts are considered “closed-end funds.” When you buy a Sprott share, you are buying a set portion of a gold or silver bar, which is stored in a vault and audited by third parties.
The metal you own cannot be re-sold to another investor. Because Sprott stores the metal, you won’t have to find a secure place to stash metal bars in your house. However, if you wish to take delivery of the metal you own, you can do so by meeting their requirements.
Shares in these trusts are currently ranging from:
- Over €6 for the Sprott Physical Silver Trust (PSLV)
- Over €12 for the Sprott Physical Gold Trust (PHYS)
- Over €14 for the Sprott Physical Gold and Silver Trust (CEF)
Don’t Overpay for Gold or Silver
The trusts are unique in that they allow you to avoid overpaying for gold or silver.
Many investors are currently overpaying for precious metals because they believe the only way to invest is buying physical coins or bars for delivery. That is actually the costliest way to purchase precious metals, as we’ll soon see.
Coins and Bars For Delivery
Most people think of coins and bars when the subject of gold and silver investment comes up. There are respected retailers who sell gold and silver coins and bars online for home delivery. For example, Apmex is one of the best-known retailers.
The most popular gold and silver coins are those minted by governments. These are referred to by the design of the coin. Some of the most popular ones are:
- American Eagles
- Candian Maple Leafs
- Austrian Philharmonics
- Australian Koalas and Kookaburras
There are also “generic” coins. These are coins from private mints that have the same purity of gold and silver but cost less than government-minted coins.
Understanding Spot Price and the Premium
However, every coin and bar that you purchase for home delivery has a “premium” charge added to it. To understand this, we need to first understand the “spot price.”
“Spot price” refers to the current price of one troy ounce of gold or silver. You can find the current sport price online by simply doing a Google search.
- The current spot price of silver is over €
- The current spot price for gold is over €1,600.
If you purchase a gold or silver one-ounce coin from a reputable retailer, like Apmex, you will pay the spot price plus a “premium” which is added to the spot price.
Since the spread of the coronavirus, premiums have increased substantially, more so for silver than for gold.
- Currently, premiums for one-ounce gold coins are at around 7%-9%.
- Premiums for silver are ranging from 39% on up.
You’ll pay this premium for every one-ounce coin you buy. You can see why this is the most expensive way to buy precious metals.
However, if you like the idea of having physical ownership of your precious metals, then opt for the largest size bar you can afford. The premium will be lower. For example, instead of buying 10 one-ounce bars of silver, buy one single 10-ounce bar.
When you buy physical metal, you own the metal directly. This must be stored somewhere. You may either pay a fee for it to be stored by a logistics firm like Brinks or you can take delivery of it and store it yourself at home.
Other Cost-Effective Ways to Buy Gold and Silver
One convenient way to invest in physical bullion is through a service like BullionVault.com. You buy the metal online and can select the city you want to store your metal in. BullionVault handles all the logistics and the fees are extremely low.
GoldMoney is similar to BullionVault but given they charge a minimum monthly storage fee, it’s not for small investors.
The Perth Mint Certificate Program is another good option. This is a respected Australian government program that allows investors to buy bullion at spot price for a small service and administrative fee. They even handle storage for you, but there is a minimum €8,500 investment.
Avoiding overpaying for gold or silver is a good first step towards making an investment.
Regardless who you decide to invest with, take the time to consider your goals. And remember that no type of investment is risk free.